This 26-Year-Old Just Sold His Company For $104 Million

Hey parents: you may be annoyed that your kid whips out his
Nintendo 3DS at every opportunity, but you never know if that
obsession with gaming is going to turn into a million-dollar
payday.

That's exactly what happened with Jason Citron, the 26-year-old
CEO and creator of OpenFeint, a mobile
platform for social gaming. Last month, he sold the company to
Japanese mobile game maker GREE for a whopping $104 million.

Citron says he was obsessed with mobile games since getting a
Nintendo DES at the age of five, and credits his parents for not
limiting the amount of time he spent with it -- as long as he
finished his homework first, they didn't care if he played video
games instead of going outside.

Citron also shared some other amazing stories from his two-year
journey from tiny startup to hundred million dollar payday:

A great bluff: Aurora Feint, the predecessor
to OpenFeint, had made a couple of unprofitable but
well-reviewed iOS games and was running out of money. Citron
floated the idea for OpenFeint in a brainstorming session. He
and his partners put up a Web site, got TechCrunch to cover it,
and were suddenly inundated with requests. They spent the next
45 days building the product.

The importance of an incubator: Citron is a
programmer first -- not a business type. But he managed to get
into the YouWeb incubator, which helped him with tasks like
hiring, marketing, and legal while he got the company off the
ground.

The funding game. Citron doesn't think there's
a bubble, but he notes that two years ago it was almost
impossible to land a startup round. Now, it's almost too easy.

Here's a transcript of the interview, lightly edited for
length.

Business Insider: You're 26 years old, right?

Jason Citron: Yep, yep.

BI: Tell me a little bit about your background.
When did you get into gaming and start programming?

JC: I got into gaming when I was five years old,
my parents got me an NES and that was the beginning of the end of
everything. Got into programming…. I must've been 12 or 13 and at
my first sleepover party, my friend taught me how to program in
Qbasic. We stayed up after everyone else went to sleep and made a
text adventure video game. That was a long time ago.

BI: What was the computer? Early Windows PC?

JC: Probably a Pentium One, 80 Mhz processor on
Windows 95 or 98.

BI: Did your parents limit your NES access?

JC: You know, they really didn't. A lot of
my friends' [parents] would do it. They'd say "you have to go out
and play in the pool now." We'd always begrudgingly go into it
but my parents never limited my video game time. They just said
to do my homework first, then whatever.

BI: So OpenFeint started by building an iPhone
app, right? And that was a single player app at first?

JC: Actually it was a single player game, but it
had high scores in it. The vision of the app the whole time was
kind of like World of Warcraft but in your pocket. We started
with what amounted to a single player puzzle game but with
leaderboards..

BI: When did you pivot to making more of a
general purpose platform? How did you make that decision?

JC: We launched the second game, which was a
massively asynchronous multiplayer game for iPhone and we had
inside the game walls, profiles, chat rooms, buddy lists, ghost
battling, asynchronous multiplayer, all this stuff. And the game
was a lot of fun but we launched it at eight dollars which was a
lot of money for an iPhone game. Prices were just coming down and
everyone was realizing that it was going to become a 99 cent
world. So we launched this game and it was doing alright, but
after that first month or so, we realized it wasn't going to be a
very profitable business. So we started looking around and
thinking about what we're going to try.

We tried a casual version of it where we took out a lot of
features and launched it for a buck, and it did okay.

We were about to run out of money--we were maybe four people at
the time--and just sitting around thinking "this sucks, what do
we do?"

So I made this off the wall comment that was like "nobody built
Xbox Live on this thing yet. I wonder if we can take some of our
chat and video board stuff and spin it into an Xbox Live for
iPhone? That sounds like a lot of work, but maybe I wonder if it
would work. Let's just announce it and see if people would want
it."

We literally did an announcement,
got TechCrunch to cover it, put up a sign up form, and had
about 400 developers sign up overnight! We said "oh crap, this is
going to be big."

I personally spent the next 45 days programming and my team
members went out and tried to recruit developers. We launched
OpenFeint at the end of March, with 30 games from 15 developers,
and the rest is history I guess.

BI: This is March of 2009?

JC: Yeah, it was two years ago.

BI: So as you worked on this product for 45
days, you must've been looking to hire pretty fast as well,
right? How did you manage that?

JC: Back then, we weren't really hiring. It was
seriously heads down "crank out" mode. We were four or five when
we launched, and then we went into hiring mode and hired a couple
of people, got to about eight or nine that summer, maybe fifteen
around Christmas, and now we're sixty.

BI: And you got some investments from
Intel Capital and some other folks right?

JC: Yes we did. We got a round at the end of 09
from DNA, and then in 2010 we got from Intel and The9.

BI: Were you always focusing on the programming
and product features, or did there come a time when you had to
focus more on some of these business aspects like hiring and
legal and funding? How did that work for you?

JC: I focused a lot on programming in the early
days. I started working out of an incubator called YouWeb. They
did Crowdstar which is a big social game company, and iSwifter
which is a streaming Flash game service for iPad, and most
recently SpacePort which is a cross platform HTML 5 game engine
which runs with native performance.

Anyway, so I started at YouWeb. The model there is that
they bring in an entrepreneur, usually a developer, and give them
a year to try and start a company. During that time, the
incubator provides a lot of the support for things like legal,
and business advice. So the first year of the company, YouWeb
guys, mainly Peter Relan, the found of YouWeb, really acted as a
hands-on mentor and advisor for me helping with hiring,
marketing, business issues, sales and all that stuff.

At some point I transitioned into CEO a little after we launched
OpenFeint. So for almost two years now, I really haven't been
programming.

BI: Do you think the acquisition is going to
allow you to get back to programming? Was that a goal?

JC: No, I don't think it's a goal. Maybe on the
weekend sometimes I'll write some code and my programmers will
not let me check it in.

BI: One big question for mobile developers is
how to promote their apps. What's your take on the best way for
app promotion? What do you think of Apple's recent move to block
some of the incentivized app promotions like they did with
Tapjoy?

JC: Well, I'll give you the OpenFeint CEO answer
first. We have something called Game
Channel which we use to promote apps every day. We've driven
up to two million downloads over the course of a couple days.

The basic idea is that a developer will come to us and say they
want to promote their game, and we'll do some kind of discount on
the game, so he'll either make it free for the day, or drop the
price after enough people to vote on it (like with a Groupon
mechanic), or we have an app where users can come check it out
and we promote it through our network. And if enough people
download it it'll go up the charts and everybody's happy. We do
that, and there are a couple other services that do a similar
style promotion.

If you use OpenFeint, there's organic cross-promotion you can get
just for people playing your game and seeing your game in a chat
room.

I think the trouble with the Apple ecosystem right now is that
there's no really slam-dunk way to promote any app. If you come
to Game Channel with an app that's not so great, it's not going
to get a ton of downloads, so you still have to build quality
content. I think the incentivized API model was the only way that
you could be guaranteed to get tons of downloads for your app
even if it wasn't so good.

I think that Apple didn't like that. They're very much about
having a high quality app store where people can come and find
great content. The notion that you could buy app slot number 2
even if your game didn't deserve it is fundamentally
questionable. I can understand why Apple changed the rankings and
did what they did. Making the changes is probably good, but
obviously not so good for the companies that were involved in it
but they'll evolve.

BI: I've been hearing Android developers
complaining a lot about discoverability in the Android Market. Do
you think that's a problem, and if you think so, what would you
suggest Google do to make the Android Market better for
developers?

JC: What we're seeing as far as discoverability
goes is that it's very much like iPhone. Tons of downloads on the
free side. Paid games get much less activity. The problem though
is that there isn't a great way to monetize the free game.

I think that to make the Market better, Google needs to focus
more on its billing infrastructure. I think that Google Checkout,
while a great idea and a good effort, falls short in a number of
areas because people don't necessarily like whipping out their
credit cards so there's a lot of friction in purchasing. And then
in-app purchases as well has a done of friction and in many
places doesn't even work. Google needs to fix its billing
infrastructure. That's the most important thing.

BI: Right now you support iPhone and Android
right? How do you decide which other platforms to support?

JC: Not exactly: we have an initiative called
"OS Connect" which lets developers use OpenFeint from any
platform as long as it has an internet connection. If you wanted
to make a leaderboard for your toaster, you could do it if it has
an internet connection.

The way that we approach the market is that we build native SDKs
for platforms that our developers really want to use, so we'll
build a lot of deep functionality for iPhone, iPad, and Android
tablets. And then for all the other platforms that a couple
developers want but aren't as popular, we have Connect. So as new
platforms gain traction, and I think there will be at least one
or two more, we will move to that platform and build deep native
experiences for them as well.

BI: Who are those one or two more? Who do you
handicap as a competitor?

JC: I think it could be Windows Phone 7. I think
they have a shot. It could be WebOS, particularly on the tablet
market. I think that HP has such tremendous distribution power
around the PC market that they can just leverage that channel for
tablets. Smartphones too, but definitely on tablets. I love the
WebOS product itself, it's a beautiful operating system. Those
are probably the two big ones up next would be my guess.

BI: Do you think that for gaming, native apps
are a requirement? Or do you think that we're moving towards a
future where everything is HTML 5 and it all works cross platform
and people gradually move off native development?

JC: I think that what you actually need is
native performance, and there are ways to get that using HTML 5
technologies like WebGL for example, which is a technology that
hasn't really come yet to mobile, but once it's here, you should
be able to get upwards of 70 to 80% of native performance if you
have a good JavaScript engine which many of the devices do.

So you're not going to get games like super top-end first person
shooters written in HTML 5 technology or something like Infinity
Blade on iOS. That's never going to show up on HTML 5. But most
games that you play on your phone don't really push the
processor. HTML 5 for casual games is probably a year or two
years away, because you need penetration of the technologies and
maybe iOS 5 will have it. But no smartphone right now really has
these technologies. I mentioned in passing, SpacePort, the YouWeb
company that has a very interesting hybrid technology that solves
this problem by basically taking WebGL.

BI: Chrome supports WebGL -- what do you think
about Chrome as a platform? Do you think that Chrome is going to
move forward, or die and get sucked into Android?

JC: I really don't know. I think that Google's
whole angle to build two operating systems for two devices that
are going to converge at some point smells like a big company
move. We have so many resources we'll do two operating systems! I
think that Chrome might be a much longer-term play for a full
cloud-based device whereas Android is really about a native
operation system for devices that have apps. So to the extent
that the "cloud" moves mainstream more than it is today, maybe in
five years, maybe all of a sudden Chrome OS will be like this
stroke of genius and Google will be like "aha we told you so!"
But in the short term, next one to three years at least, I can't
imagine Chrome OS having much traction.

BI: How long are you going to stick around? Are
you there for a while? Do you have plans to do anything else?

JC: I will be sticking around for a while. My
personal ambition--it might come off as a little naive--but it's
a change-the-world kind of thing. I see OpenFeint as an
opportunity for me to really help developers create what I call
"shared experiences." You play games, right? So you've had
experiences like Mario Kart or FIFA where you're playing with
buddies and right as you're about to win, your friend comes up
behind you and wins. You throw the controller on the ground and
yell and scream at each other. Those moments of connecting with
your friends where you can laugh and share like that are so
powerful.

I feel like with OpenFeint I have the opportunity to create those
kinds of experiences for billions of people all around the world,
and particularly the touch screen platform. They're going to be
everywhere. Every nook and cranny around the world is going to
have a touchscreen device in the next five or ten years. I'm
really into the idea of building a platform that lets developers
create these shared experience to reach billions of people. We
haven't gotten there yet though. We have 80 million users and the
types of shared experiences that we're enabling are just
scratching the surface. So I'm personally excited about chasing
that dream and I think that the GREE merger enables me to
accelerate my path towards that.

BI: The question I ask everybody: do you think
that we're in a bubble?

JC: No. I don't think we're in a bubble.

Let me rephrase that. If by bubble like the '99 bubble, then no.
That was lack of awareness around what type of value Internet
companies could actually create. It was companies going public
with no revenues or minimal revenues and no real foundation to
stand on. So the definition of a bubble as I take it is as
something fragile that could pop at any moment. So, I don't think
that we're in a bubble that's based on misconceptions right now.
I think the environment we're in is one where companies that are
being bought and going public are revenue generating. Or they
have real assets that they can build lasting businesses on.

I do think that early stage valuations might be in a bubble,
because there's a lot of excitement to get in at the ground floor
and build a company like this. So you're seeing lots of early
stage funding go through the roof. So I think that that piece of
the puzzle might be in a bubble, but across the board, we're not
in a bubble.

BI: It seems like there's a lot of money flying
around and there wasn't two years ago, so it's an interesting
time.

JC: I remember when we started OpenFeint it was
very difficult to raise a round. And over the last two years it's
got to the point where I'd be getting emails every day from
people trying to fund. It's a very different climate.

BI: Last question. Any new games that you're
really hot on right now or addicted to?

JC: I'm itching to play Portal 2, but I just
haven't had four hours to just sit down and play it. That's the
big one on my list right now.